Stock trading is one of the best ways to invest your money. However, it requires some knowledge of how the stock market works in order to get the most out of it.
Learning and understanding swing trading is a great way of increasing your profits in the stock market. It is a technique method that’s widely used to identify entry and exit points and taking advantage of it.
What is swing trading?
Swing trading is a form of trading that concentrates on making profits under the changing trends of price action within short timeframes. Swing traders will always try to pick upswings and downswings in stock market prices.
There are a lot of strategies that can be used to swing trade stocks. The most important thing is to keep an eye on the various trends of price action and move into action when there is a significant change.
Below are 5 swing strategies you can use:
1. Support and resistance triggers
Support and resistance lines are the cornerstone of technical assessment where you can create a successful stock swing trading technique around them.
Normally, a support level shows a price level on a chart underneath the current market price. At this point, the purchase price is stable and cannot be moved by the selling pressure. Consequently, a decrease in price is held, and the priced returns to normal.
Resistance is the opposite of support. It generally represents a price level on top of the existing market price where buying pressure can easily be overpowered by selling pressure. This eventually leads the price to return back against the upward trend.
2. Fibonacci retracement
This strategy can be useful to traders when it comes to identifying resistance and support levels. Stocks usually tend to retrace a particular percentage prior to reversing again and aligning to Fibonacci ratios of 68.8 percent, 38.2 percent, and 23.6 percent within a stock chart.
Some traders also look at a 50 percent level despite the fact that it doesn’t fit the Fibonacci pattern. This is simply because stocks have a tendency of reversing after retracing for half the previous action.
A stock swing trader can decide to insert a short-term sell position in case the price in a downward trend bounces back to the previous level.
3. Catch the wave
This is another top swing trading strategy. It is a swing strategy that focuses on getting a hold of “one move” within a trending market. The goal here is to get after the pullback ceased and the trend has higher chances of continuing.
But it is important to note that this trend may not work in some types of trends. As such, you will want to participate in trends that contain a deeper pullback since there is no much hope towards the upside.
Here is how you can catch the wave using this swing strategy:
• Pick a trend that respects the 50MA
• Wait for a bullish price rejection when you realize that the market is approaching the moving average
• In case there is a bullish price rejection, proceed with long on the next candle
4. Channel trading
For this swing strategy to work, you need to identify a stock that is showing a strong trend while trading in a channel. For example, if you are plotting a channel around a bearish trend, then you should open a sell position as soon as the price bounces down.
It is important to trade with the trend when using this channel trading as a swing strategy. This means that when the price is on a downtrend, you can only search for sell positions.